Absorption costing versus direct costing
Haille Corporation has determined the following selling price and manufacturing cost per unit based on normal production of 72,000 units per year:
| Selling price per unit | 22 |
| Variable cost per unit: | |
| Direct materials | 4 |
| Direct labor | 4 |
| Variable factory overhead | 2 |
| Variable cost per unit: | 10 |
| Fixed cost per unit: | |
| Fixed factory overhead per year | 324,000 |
| Fixed selling and administrative expense per year | 48,000 |
| Normal unit production per year | 72,000 |
| Month | Units Produced | Units Sold |
| October | 6,000 | 3,000 |
| November | 1,000 | 4,000 |
| December | 8,000 | 6,000 |
October has no beginning inventories.
Required:
Prepare comparative income statements for each month under each of the following:
1. Absorption costing (include under- or overapplied overhead)
2. Variable costing
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